It’s guest blog time again on MFW and this week it’s the turn of lifelong City fan, Barry Brockes who has some questions for the City board regarding their current direction of travel.
Barry saw his first match in August 1956 and sits in the upper Barclay with his son where they have sat for the last 23-24 years. He’s an accountant who was responsible for Norwich Union’s (pre-Aviva) published accounts.
I have great difficulty in understanding how Club’s ‘ self-funding’ model is going to work in both the immediate and longer term.
While acknowledging the financial commitment made by the three largest shareholders, it should not be forgotten that they will almost certainly make a significant profit should the Club be sold. As such I tend to regard their shareholding as an investment.
If Delia and her husband find a way of effectively passing control to her nephew, then any potential profit is being deferred either within the family or in some form of trust arrangement. While loans from directors have been made at zero interest rates and have undoubtedly helped keep the Club’s financial head above water I believe these have all been repaid.
I therefore think it should be recognised that the ongoing financial contribution of the directors to the running of the Club is zero.
In terms of moving forward, it seems that the Club will have to rely primarily on net player sales and ticket revenues to balance the books in terms of profitability and cash flow. We have recently been told that season ticket prices will again be frozen, with the Club appearing to regard this as a magnanimous gesture.
I think, in fact, most season ticket holders will feel that this does not equate to value for money compared to what was on offer for the same price in the Premier League a few years ago. The recent survey of ticket prices in the top two divisions also showed that our ticket prices are among the priciest in the Championship and more expensive than several Premiership clubs.
Turning to net player sales, we are gradually streamlining our squad to remove high-earners to boost the profit and loss account and consequently create opportunities for younger players on cheaper wages to develop and improve – and then be sold!
Unfortunately, we do not have a very good track record of generating surpluses from player trading, as for example at Southampton. It is a massive leap of faith by the Board that this policy will be able to run and run to meet the shortfall from ticket sales.
Obviously, something that will change things dramatically would be promotion. Despite some people’s views to the contrary I really don’t believe that the Club does not want this. However, if it did happen then there needs to be a much better and longer-term plan to hold onto and then sustain our place at football’s top table.
Despite a first relegation, Burnley is a classic example of how to do it. Unfortunately, our recent experience from being in the Premier League does not inspire confidence.
I assume that a ‘self- funding’ model means that the current majority shareholders do not plan to either make further loans to cover cash deficiencies or subscribe for further shares. Hopefully Steve Stone will have carried out a risk assessment as to what will happen in the future if we have don’t have a player that we can sell for sufficient money?
Would this mean that season ticket holders have to foot the bill or would Tom Smith or other directors be in a position to finance any shortfall? I think the answer to both these questions is ‘you must be joking’. The options are external finance, which presumably would be loan rather than equity capital, or as a last resort, administration.
It would be interesting to have the views of Steve Stone, or MFW columnists who claim to have a hotline to the Board, to explain how this approach is sustainable in the future.
Thanks to Barry for offering us his thoughts. If Steve Stone or indeed any of my colleagues who have an in on the Club’s inner sanctum would care to respond then please feel free.